Indian Rupee Declines Amid FII Outflows, Rising Oil Prices, and Anticipated Economic Data
The Indian Rupee (INR) weakened on Monday against the US Dollar (USD) following a brief two-day gain. The drop in the INR comes as Indian stock markets saw a pullback after hitting eight-month highs, driven by profit-booking. At the time of writing, the NIFTY 50 hovered around 25,550 (-0.33%) while the BSE SENSEX stood at approximately 83,770 (-0.34%).
Concerns over potential Foreign Institutional Investor (FII) outflows and rising global crude oil prices have also put additional pressure on the INR. As India remains one of the world’s largest crude oil importers, higher oil prices directly impact its trade balance and currency value.
Adding to the pressure, investors are cautious ahead of India’s upcoming economic releases due Monday, which include Industrial Output, Manufacturing Output, and the nation’s Trade Deficit figures.
Crude Oil and OPEC+ Impact
West Texas Intermediate (WTI) crude is trading around $64.70 per barrel. While fears of a Middle East supply shock have eased due to a ceasefire agreement, OPEC+ plans to increase oil production by 411,000 barrels per day in August following a similar rise in July. This move may cap the upside of oil prices but still weighs on India’s import-heavy economy.
Market Sentiment and Foreign Inflows
Earlier, the Rupee saw gains supported by strong FII inflows, with foreign investors purchasing over ₹8,915 crore worth of Indian equities in June. Analysts say this shows investor confidence in India’s economic trajectory. However, short-term uncertainty has led to a reversal in trend.
US Dollar Trends and Fed Outlook
The US Dollar Index (DXY) trades modestly lower near 97.20. While the greenback remains broadly stable, upcoming US employment data may influence sentiment further. June’s Nonfarm Payrolls are forecasted at 110,000 jobs (down from 135,000 in May), and unemployment is expected to tick up to 4.3%.
US economic indicators continue to show weakness, with May personal spending falling and personal income dropping by 0.4%, the steepest decline since September 2021. Expectations for a Federal Reserve rate cut in September are growing, potentially capping USD gains.
US President Donald Trump is also expected to name a new Fed Chair nominee, possibly by September or October. Candidates reportedly under consideration include Kevin Warsh and Kevin Hassett.
India’s Economic Outlook and Growth
Economists project India’s GDP growth to ease to 6.4% for FY 2024–25, slightly below the 6.5% recorded in the previous year. Despite rate cuts by the Reserve Bank of India (RBI), growth is expected to be tempered due to global uncertainties and domestic headwinds.
Technical Overview: USD/INR Holds Steady
The USD/INR pair remains steady near 85.50, slightly below its nine-day Exponential Moving Average (EMA) at 85.81, signaling short-term weakness. The 14-day Relative Strength Index (RSI) stays below 50, suggesting continued bearish bias.
- Support: Immediate support lies at the monthly low of 85.30.
- Resistance: Initial resistance is seen at the 9-day EMA of 85.81.
